The Exclusivity Dilemma

Do exclusive cellphone contracts inhibit or promote innovation?

7 December 2009

This Month’s QuestionThe Exclusivity Dilemma

The U.S. Federal Communications Commission is investigating whether exclusive contracts between cellphone makers and carriers are helpful or harmful to innovation. One such example is the arrangement for AT&T to be the exclusive carrier for Apple’s iPhone in the United States. Many iPhone users complain about AT&T’s service but love the iPhone and can’t switch to another carrier. In France and other countries, however, the iPhone can be used with a number of carriers. Critics of exclusive contracts argue that they inhibit innovation and are unfair to consumers. But some wireless carriers say such deals promote innovation by inspiring cellphone makers to develop imaginative products.

Do you think exclusive cellphone contracts inhibit or promote innovation? Are they fair to consumers?

Respond to this questionby e-mail or regular mail. Space may not permit publication of all responses, but we’ll try to draw arepresentative sample. Responses will appear inthe March issue of The Institute and may be edited for brevity. Suggestions for questions are welcome.

Responses to QuestionA Patent "Strike" for Engineers?

A recent editorial on EE Times’s UK Web site called for engineers to band together and stage a patent “strike” to gain control of their inventions. Engineers should refuse to sign contracts giving their employers sole rights to their inventions, the editorial said, adding that engineers should refuse to file patent applications “for every idea,” a practice that companies have used to spawn “a business of litigation and licensing that charges for portfolios by the pound.” Although engineers shouldn’t stop working during a recession, the editorial added, it’s about time engineers stood up for themselves.

Do you agree? Would you take part in such a patent strike?

No Choice

Few engineers are in a position to refuse to sign away their rights to their inventions, because most need a job. Even if they could find a way to retain ownership rights, it’s doubtful that many would have the economic resources to take advantage of their patents. Besides, the concept of one person working alone to come up with a novel, patentable idea is by and large a thing of the past. And the idea that a patent is a pot of gold is—with rare exception—an illusion.

Michael Ernstoff Los Angeles

Litigation Lowdown

As a patent lawyer, I have much exposure to the business and legal sides of engineering. I realize that without patents many engineers would be jobless. Very little would get invented without employment contracts that assign inventions to companies. The business of licensing and litigation—like it or not—is part of the modern electronics industry.

Given the lack of balanced media coverage, one may think it’s time to resist patents. Indeed, there are faults with the system when companies do such things as troll for infringements. Companies often go too far with their contracting and licensing practices, but overall we need the patent system.

Perhaps it will give engineers some comfort to know there are people in the legal and corporate worlds who see both sides of the issue and will stand up against bad patent practices.

Tom Grek Hong Kong

Park Your Rights

Companies pay their employees to advance the organization. When an employee receives a patent, it usually is a result of a creative idea related to the company’s future. That employee does not deserve an ownership interest. He or she learned what the company needed on company time and likely tested the development on company time while using company tools. Anyone who refuses to sign over patent rights to a company when offered a position should find another job, including becoming self-employed.

Donald G. Wilson Carlsbad, Calif.

Keep Ideas to Yourself

Companies use patents to keep competitors’ inventions off the market. If a company engineer invents something that would improve a product only slightly, there is rarely a net financial gain for the company after retooling costs. But a competitor could incorporate the improvement at virtually no cost and come up with a new product. The originator doesn’t want that to happen, so it tries to protect itself with a patent. Keep your inventions to yourself. Save them for a new-product start-up, either in your current company or at a new one.

James A. Kuzdrall Nashua, N.H.

Show Me the Money!

I fully support a strike. Engineers have been taken advantage of for far too long. They should receive no less than 2 percent of the gross revenue from the patents they’re responsible for. The payment must be based upon the gross revenue—not the net. Everyone should stick together and insist on an addendum to any existing employment agreements, and the same provision should be included in all future agreements.

Ray V. Miller Burnsville, N.C.

Patent Pandemonium

Patents are totally useless for the inventor; they serve only to enrich patent attorneys. By suing everybody in the industry for patent infringement, attorneys frequently settle for a small, extortionate fee and earn a nice living, but the inventor usually gets nothing substantial in return.

Sadly, too many people are distracted by the illusion that they can become rich if only they could patent their ideas. This leads to too many useless patents issued for ideas that do nothing to improve our lives.

What matters is who can bring an idea to market. If you have an idea and patent it but do nothing with the patent, you’re just getting in the way of progress. If you have an idea and put together a team that builds the product and sells it, then you have done something worthwhile that deserves economic reward.